In Liechtenstein, metaverse meets fine art, and fine art means TradFi

Expanding access to fine art and bringing in new investors, a partnership between a Liechtenstein bank and a metaverse project highlights the potential of fine art as an area of blockchain adoption.

Andy Warhol's "Silver and Blue Marilyn" displayed on a screen at ArtMeta's Art Basel event. Source: ArtMeta blog post, https://medium.com/@artmetaofficial/artmetas-metaverse-unveiled-39ffe010e43b

Liechtenstein-based VP Bank, which specializes in asset management, investment advisory, and wealth planning, will tokenize physical artworks in collaboration with ArtMeta, a metaverse project focused on fine arts.

The deal builds on VP Bank’s ongoing interest in physical asset tokenization. Last year, the bank tokenized its first work of art, a postwar painting the bank hasn’t revealed due to “privacy reasons for a client.” It must have gone well, though, because in May, they followed up by tokenizing a ​​vintage Audemars Piguet watch.

Tokenized Audemars Piguet watch on display.
Tokenized Audemars Piguet watch on display. Source: VP Bank

Friendly laws and eager clients

VP Bank’s tokenization spree is courtesy of Liechtenstein’s TVTG law, also known as the Blockchain Act, which provides a legal framework for token issuance. Under the TVTG, tokens can carry all types of rights, including ownership, patents, and trademarks.

New emissions need to be approved by Liechtenstein’s Financial Market Authority (FMA), which enforces client protection measures and anti-money laundering (AML) laws. The Blockchain Act, which Adrian Hasler, the country’s prime minister at the time, called “an essential element of the government's financial market strategy,” came into effect in 2020.

Hasler wasn’t exaggerating. TradFi increasingly sees tokenization as an opportunity to leverage blockchain technologies while sticking to mainstream finance standards, especially in jurisdictions with clear regulations.

According to VP Bank, customers are enthusiastic, too. “Surveys of our key clients about tokenization services show that there is overwhelming interest in digitizing collectible items,” Thomas von Hohenhau, Head of Client Solutions at VP Bank, said when the company celebrated the fractionalization of the Audemars Piguet.

A similar initiative was recently put forward by the Warsaw Stock Exchange (WSE) in partnership with Polish online fine arts platform ArtInfo.pl. Focused on high-value physical artworks, the WSE’s program is expected to fractionalize its first asset toward the end of the year. Meanwhile, Zurich-based crypto bank Sygnum has successfully tokenized the ownership of Pablo Picasso’s Fillette au béret, and even an NFT, CryptoPunk #6808.

Andy Warhol served twice

The bank will also collaborate with ArtMeta to digitize high-value art collections and display them in the ArtMeta metaverse, whose first district, a floating digital island called Tchan-Zâca, was revealed last month at Art Basel in Basel, Switzerland.

The highlight of the event, Andy Warhol’s Silver and Blue Marilyn, which guests saw in both physical and digitized form, came from VP Bank’s private collection. Under the partnership with VP Bank, Silver and Blue Marilyn will be tokenized and featured as part of ArtMeta’s NFT offering.

More blockchain-based art doesn’t equal more Bitcoin

The deal underscores the role fine arts can play in the integration between mainstream finance and crypto, with both established and emerging artists poised to benefit from blockchain-based technologies, and TradFi eager to lay claim to another trend in the art market.

One reason why both sides are watching the alliance so closely is that it carries the potential for opening up fine arts to a lot more investors. Both metaverse-based art galleries and fractionalization of physical art lower the entry bar for those with fewer opportunities to experience art in the real world or acquire expensive artworks on a market that’s famously difficult to navigate.

“Tokenization will change the art market completely,” said Hannes Schmid, a photographer whose work was tokenized by VP Bank. “Traditional art trading will shrink, multiple owners of one artwork will be the future,” he added.

Soon enough, other real-world assets could follow suit. What remains to be seen is whether a wider access to tokenization eclipses or strengthens cryptocurrencies. If tokens issued on a centralized blockchain become more widely used than Bitcoin, the crypto community might not be happy. But that landscape hasn’t been painted yet.